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The airline industry’s version of Nosferatu, Italy’s Alitalia, is back in the spotlight following the opening of the European Commission’s investigation into whether a €300-million loan constitutes illegal state aid. This new source of lifeblood may keep the carrier animated, but for how long? Most analysts had concluded that the collapse of KLM-Air France’s bid to purchase Alitalia amounted to the proverbial stake in the heart. Not so, said new Italian Prime Minister Silvio Berlusconi, who made the continuing operation and control of Alitlia by Italians one of the components to his political platform. If that wasn’t enough to raise eyebrows, a new wave of concerns came forth following the announcement that Antonio Tajani, a longtime political ally of Berlusconi, was tapped to become the new Transport Commissions for the European Union following former commissioner Jacuqes Barrot’s transfer to become the Commissioner responsible for Freedom, Security and Justice. Prior to his departure from transportation duties, Barrot had been highly critical of the Italian loan.

The obvious question which remains is how willing Tajani will be to strictly enforce EU competition rules against the stated agenda of his former cohort. In short, does he share in Barrot’s vision for robust enforcement against States which try to distort the market? In Europe, at least, there appears to be at least provisional satisfaction that Tajani can remain objective despite his ties to the current Italian government. The European Parliament gave a vote of approval today, satisfied with his repeated insistence that the treaties of the EU must be respected and that EU’s "one time, last time" rule with respect to airline bailouts—in this instance referring to Alitalia’s 2002 subsidy—will be maintained. During his grilling before the European Parliament, Tajani is reported to have stated: "I am not pocketable by any lobby." He went on to stress that Alitalia was no exception to the EU’s competition rules and that an investigation was already underway.

In the coming months, the European Commission will scrutinize whether or not the Italian government’s loan is or is not illegal state aid. The European Commission’s document, Guidelines for State Aid to the Aviation Sector, OJ C 244 (Oct. 1 2004), mandates that the Commission look into whether a government loan constitutes illegal state aid or if it is not, rather, equivalent to a regular investment transaction, the sort which a private stakeholder would make. In the matter of Alitalia, it will no doubt be difficult for the Italian government to claim that its substantial loan was the sort a private investor would make, given the carrier’s longstanding history of losing money and the fact that it relied on the government only six years ago to save it from insolvency. Given that the Commission is allowed to take into consideration market developments and the position of the airline vis-à-vis that market, Alitalia’s days as an outmoded, undisciplined, participant appear numbered. While the Commission has eighteen months to conclude its investigation, it will be interesting to see whether or not Alitalia, which reported a pre-tax loss of €215-million in the first-quarter, will even be around to see it.